What's Wrong With These Beautiful Pictures?

It looks like an idyllic villa community with lush gardens, beautiful homes, and city towers rising in the background. This is Nakheel's Garden View Villas. The project was mostly completed in fall 2003, at which point buyers promptly moved in.


But, wait a minute... there's something wrong with both these pictures and the tranquil story they tell. It is mid-2006, almost 3 years since completion of the villas and they are in fact empty. Behind the facade is a ghost town.

The story goes that shortly after residents moved in in 2003 they found serious cracks in the walls. It was determined that there were structuaral problems serious enough to merit vacating all residents. Up till now, the villas remain empty, but with beautifully manicured gardens. The structures are essentially unlivable.


Why not repair or demolish?

This is the most obvious question to ask. Although homeowners were moved out over 2 and 1/2 years ago, one wonders if they have been compensated. Apparently there are legal and insurance matters that account for the villas being left as they are, albeit with lawns well-kept.

It is hard to imagine they would be demolished. These are low-rise villas, not high-rise towers. Why not shore up the defective walls and otherwise repair whatever defects there are?


Opinion

The lesson of the Garden View Villas project goes beyond its tranquil streets. It raises questions about what developers are able to deliver and how they respond to problems. To Nakheel's credit they moved out the affected investors, but the failure of this project remains a well-kept secret. The picture on the outside is pretty, just as are all the glorious renditions of projects across the city and at sea. But it takes a certain amount of expertise and a focused commitment to deliver as promised on artfully rendered proposals.


   Nakheel's Discovery Gardens Apartments

Nakheel is one of the largest players in the market and they have perhaps the grandest visions. They have the resources to deliver, but do they really have the expertise and dedication required to do the job well? Few should doubt that they will deliver well on the Palm islands, even if delayed. These are their showpiece projects. But how well will they do on less noteworthy developments, like Discovery Grardens or International City?


   Construction at the trunk of Nakheel's Jumeirah Palm Island.

Emaar, as Nakheel's chief rival, has perhaps established a better track record. They have delivered already a few thousand villas. These were not without problems but they certainly weren't disasters. It has done even better with its showpiece projects, like the Dubai Marina waterway and Dubai Marina Phase 1 towers and villas. These projects assert that Emaar is able to deliver on the projects it values most. The same will probably be the case with the Burj Dubai, rising beyond 50 floors at present to eventually reach 160 or more.


   Emaar's Hatton Villas and Dubai Marina towers in the background.

But how will Emaar's less noteworthy projects fare? They struggle with the same issues that Nakheel does. Do they have the expertise and required level of dedication toward all of their projects, to be able to meet the high standards they advertise?


   Emaar's The Greens, mostly a success story.

Similar questions arise with regard to smaller developers, with the added element that they may not have the financial and logistical resources that both Nakheel and Emaar have--as does also No. 3 player Dubai Holdings, responsible for Jumeirah Beach Residences and many Business Bay projects. Then there's Damac, a large private player, but one with relativley little experience in real estate development and a fair share of controversy. The verdict remains out on them.

Dubai Marina Towers

Dubai Marina has an interesting mix of projects under master-developer Emaar and a multitude of private developers, large and small. Will any of the smaller developers have problems similar to Nakheel's with their initial developments? Towers are a rather different beast from villas, requiring even more care and expertise. Ironically, to the benefit of investors, the smaller developers with less clout may be better positioned to deliver.

They have to be more concerned with the reputations they establish on their early projects, and are therefore likely to make a more concerted effort to do the job right. But then, there is still the question of expertise.

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A Real Head Turner

This is one for Dubai aficionados:

Dubai sprouts a forest of building cranes, but still needs more.


   Dubai Marina's Al Fattan Towers (top-right) and the JBR towers (above).

It's yada, yada, yada about construction crazed Dubai. The AP news article provides perspective on the scale of the building boom. Although Dubai is trying to sell itself as an upscale resort destination, offering holiday homes for the rich and up-and-coming around the world, the phenomenal building program in and of itself is causing people to take note. If not to holiday, some will just want to come and see or get in on the action. It's like having the opportunity to witness and experience the creation of Manahattan again, as happened in New York 80 years ago. Only this time, the scale is even bigger.


   More than Manahattan?

The numbers are sometimes staggering if not just simply unbelievable:

• 30,000 cranes--in one city?
• 200 towers in one development (Dubai Marina)
• Another 200 towers in Business Bay and the Burj Downtown
• Another hundred in Jumeirah Lake Towers area, plus dozens more in Dubai Land
• 5 and counting--buildings to rise above 100 floors
• $200 billion dollars in projects, and counting
• the largest airport in the world, to handle eventually over 100 million passengers per year
• the largest mall in the world, to be followed again by the largest mall in the world, to be followed again...
• a theme park of dinosaurs, more ski slopes, a re-creation of the world's seven wonders, a hotel strip with 25,000 rooms, and sports facilities sufficient to stage the Olympics
• three man-made islands in the shape of palms--the smallest of which is larger the Manahattan
• 200 resort-sized islands laid out in the shape of the world
• a new waterfront development to hold a population of 500,000
• a metro, trams, monorails, new freeways, dozens of overpasses, bridges and tunnels--two of the new bridges to have 24 lanes between them
• yada, yada, yada!

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That Speical Touch...

May Not Be Worth It

The matter in question is a service equated with luxury that has become more and more common in Dubai and Abu Dhabi--valet parking. It is a practice, hardly innovative and most likely copied from what is common in the West, but one that is marketed as an example of high quality of service. Dubai Marina already has and will no doubt be dotted with not only more luxury hotels offering such services but high-end residential properties as well.

Dubai Marina's Al Fattan Towers, housing a new luxury hotel.
The problem with this level of service is that it entails a certain level of risk, which in common practice is shrugged off by both patrons of the service and its providers. The prime source of the risk is the driver who receives the car. In short this individual must have the experience and know how to properly handle any make or model of car, from the humblest economy car to the most exclusive luxury sedan or sports car, including the myriad of SUV's that fall in between.

This involves no meagre measure of ability, and yet it is treated as such by the valet service providers. Like nearly every other presumably low-level service job, the service provider hires workers to whom it can provide the lowest pay and benefits. In the case of valet drivers, this can mean an ex-laborer who has completed a drivers training course in one of the UAE's many driver training institutes. These schools are known for their high level of fees and low level of training. Nevertheless, no one expects a new driver to be on a par with a professional. Yet new, inexperienced drivers are just the type of people hired by the valet service providers.

Although for insurance purposes, most hires will have had licenses for a minimum of one year, in practice many will have just sat on their licenses waiting for the one-year period to lapse before taking on their first driving job. These drivers are in effect the weak link in the equation, but they are not the main party at fault. That distinction belongs foremost to the company that hires them and yet fails to provide adequate training, and secondarily to the hotel, residence or other facility that contracts this service while not insuring that the contractor is providing drivers of satisfactory calibre.

What this all amounts to is a certain level of risk to the guest who hands over his car. It is unconscionable that new drivers essentially practice or train in the guests' cars. As a result, accidents will happen, which raises the even more thorny issue of what compensation the guest receives for a damaged and in some cases destroyed car.

These are things I know about because my car was wrecked a few days ago--at a prestigious hotel, by the driver of a valet service which claims to be the best in the business. In a perhaps frank slip of the tongue, I was told that drivers have no particular experience when hired, as "there are no valet schools in Dubai." So, of course they have to gain experience on the job. Wrong answer! They need to be trained first by the service provider, even if that company has to hire a fleet of cars for a day or two to do so.

Is the courtesy parking worth it?

I know, in fact, a lot more about the industry because I have a close friend who works as one such driver at a prestigious hotel for one of the other top valet service providers in the country. He along with his cohorts got little training of relevance when hired. The first time behind the wheel of a Lamborgini, a Mercedes, a Honda Civic or whatever the make of car, might be in the company of a supervisor or senior driver--but then again, it is the guests car which serves as the training vehicle. In the early days the new driver is filled with a sense of apprehension, until he eventually becomes experienced. My friend has seen a number of accidents both minor and major which resulted from either the inexperience of drivers or reckless behavior including "having fun" with high-performance cars.

And with regard to what happens after an accident, well there are limits to the level of compensation that the agent is required by law to provide. In other words, for a car more than two years old, repairs are required to be made only by the lowest bidder as opposed to being done by an authorized dealer or a garage of the owner's choice. So, there's is no certainty that one will get his car back in the condition it was handed over. Of course, the hotel or facility who contracts the service should require in its contractual agreement with the service provider that it provide a higher level of compensation, but this may not be the case.

What then is the customer to do? Not hand over his keys to the valet driver? That is certainly one option. Another is to contact, in advance, the hotel or property which provides the service and find out in writing what level of compensation they provide in the case of accidents. Of course, this isn't the sort of thing that can be done on the fly, but if one is a frequent patron of the establishment it would be well worth the trouble to do so. Thirdly, one may ascertain in advance whether his own insurance provider will pick up repairs or costs where the third-party insurer falls short. Of course, one will need to pay a premium for this level of protection, when such compensation should be the responsibility of the establishment or its service provider.

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That $64,000 Question

I suppose I am a would-be or wanna-be economist when it comes to property matters in Dubai, especially in the face of a good question. One such question came to me from a Muhammad R.,

Is it worth spending so much money in buying property in Dubai Marina?

One way to answer that question is to speak about Dubai in general. Thus in reply,

Having lived in the region for six years and seeing how things work, what is happening in Dubai in my opinion is not a passing fad but a genuine and sustainable effort to create something that has never been tried before in terms of development. It is happening in the context of a stable environment. Only people who aren't very familiar with Dubai seem to quesiton that. I doubt that even a major terrorist attack would upset the state of affairs, as some people seem to fear.

Despite the massive construction boom it isn't an all-eggs-in-one-basket scenario. There's trade, transport, tourism along with other industries. Dubai has a rich low-tax environment. The US military has a stealthy but substantial presence. And of course there's all the money coming in from surrounding states. In short, Dubai has a lot going for it. I don't see any property market collapse or political upheaval or any other destabilizing event in the cards.

The worse that can happen is that 2 or 3 years hence there could be an over supply of property and tourism might not continue to grow exponentially as many seem to be banking on. In such a scenario I would expect that rental rates would fall (but not crash) and property values would most likely stagnate or fall somewhat (but not crash). It will only be in 2 to 3 years that the risks to investors increase, as price levels begin to peak. From those peaks there could be a substantial retreat. But we're not there yet.

So, property in Dubai is a good buy, and for additional reasons (which I'll go into later) the Marina I think is an even better buy.

To talk specifically about Dubai Marina, one then would need to compare it to the many other developments across Dubai. I discuss this question in some detail in The MAG 218 Environment, which looks at the pluses and minuses of the Dubai Marina location with regard to one of its many towers (the MAG 218), in comparison to other Dubai locations.
(See the latest Dubai Marina images.)

Whether more exclusive addresses like any of the Palms, commercially-oriented centers like Business Bay, entertainment districts like Dubai Land or other water-themed developments like the Dubai Waterfront, there are valid arguments for any one area as opposed to another.

In short, the Dubai Marina has to its credit immediacy--it is further along toward completion than any other similarly sized development--and high-letting potential, offering suitable accommodation to both residents and tourists.

Whatever one's take on the $64,000 question, it is interesting to ponder. Long-time residents in the UAE will likely have a different view from newcomers or passers-thru. Industry professionals may be biased one way or the other. Economists, of course, should be able to provide the best analysis. In that spirit, I offer my own educated guess.

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Wanton Carelessness or Sabotage--Laborers May Be Striking Back

What will it take for more concerted effort by the Dubai government, federal government and companies operating locally to make significant progress in improving conditions for laborers? A recent UAE Community post highlights two Gulf News articles which point to the ongoing problems and governments efforts--often inadequate--to respond. In one report the government announces a survey to study, among other things, the inhumane treatment of workers. In another article anger among workers at having to face severe water shortages is discussed. Workers continue to be neglected to the point that they are even being expected to labor in 40+ degrees Celsius, then return to their over-crowded camps without water for bathing.

Worker Response

There have been repeated stories of strikes among laborers, illegal yet growing in frequency, size and severity. Workers, however, may have at their disposal a more insidious yet nearly invisible means of protest. They may, when not being observed, work in a deliberately careless manner and even attempt to sabotage their own work in ways not readily apparent.

A plumber might deliberately apply poor seals or loose bolts. An electrician might install wiring in a vulnerable fashion. A carpenter might construct inadequate supports. Once covered in plaster the defect will be hidden, and if craftily done, the error will not become apparent until weeks, months or even years later, after the structure has been put into full operation.


Such actions by disgruntled workers ought not to be considered inconceivable. In fact, the current situation in the country appears to be one of mounting frustration among workers, even as by some measures people are beginning to respond to their complaints.

The danger is that projects will inevitably suffer from poor quality workmanship. A case in point is the Damac's Marina Terrace tower in the Dubai Marina (see A Week of Construction in the UAE ), which suffered severe plumbing failures within weeks of being opened to residents. This incident ought to be a wake-up call to not only the concerned parties but government officials and the construction industry at large.

The only effective way to minimize the risk of workers resorting to such tactics is to take more drastic measures to improve their lot.

Related Posts on Dubai Marina & DM Blogs:

• Worker Unrest
  
• Take Not From the Mouth of Labor
  
• The Pyramid Builders at Al Sufouh Road

A new Marina Mall, Hotel and Residences is one of the many massive projects currently under construction in Dubai.

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A Week of Construction in the UAE

What happens in a typical week across the vast landscape of construction projects in the UAE? Or even more pertinent to the topic of this blog, what goes on in the Dubai Marina? The latest issue of Construction Week reports Another worker dies on the JBR site, which adds one more to a tally of two killed in the previous month.

Another story announces, DAMAC flooding fiasco provokes tenants’ fury in which developer DAMAC's newly completed Marina Terrace tower suffered its second major pipe-bursting incident in four weeks, causing tenants potentially thousands of dollars in damages. Advice to tenants from the developer's chief executive, Peter Riddoch, was to take up damage claims (if any) with their individual insurance firms.

These are certainly the kind of reports that make you wonder--how many deaths and injuries go on (mostly unreported) at construction sites across the city and country, and of what quality are the towers and other structures being built?

Also, whose responsibility is it when things go wrong? Apparently, DAMAC's cheif executive doesn't believe it his company's responsibility, even in a newly commissioned tower. Will the insurance providers readily take up the task of paying out when blame can be so clearly assigned to the builder?

Further afield in the wider Dubai environment was news of the 4-5 day strike by the 8,000-10,000 laborers of building contractor Besix. This was apparanlly the largest and most organized strike ever in the country, yet the outcome for those involved suggests their efforts were in vain. The latest issue of Construction Week goes into some detail in several different articles on laborers' issues.

The bigger question is what such stories say about the building phenomenon taking place across the city and country. Accidents do happen--but why? Is there enough accountability? Are workers needlessly dying and being injured, and are investors and homebuyers being handed structures of inexcusably poor workmanship?

(The articles referenced above are also posted in this post's comments.

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